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Managerial )sychology Management science Management styles Management system Managerialism Micromanagement Macromanagement Middle management Music management .rganizational behavior management .rganizational studies )hysical %nternet )redictive analytics 'eam building Scienti&ic management Senior management Social entrepreneurship Hirtual management "illiamsonAs Model o& Managerial @iscretion )eter @ruc*erAs management by obGectives $liyahu M2 -oldrattAs 'heory o& constraints )ointy Haired 4oss )ortal Systems science portal I Categories: Human resource management Southwest Airlines 8558: An %ndustry 3nder Siege Harvard Business School: 9-803-133 $xecutive Summary Southwest Airlines in 2002 faced a serious of im ortant mana!ement decisions after the 9"11 tra!ed# in order to continue the record $rea%in! com an# !rowth that Southwest had e& erienced since the 19'0(s) Southwest Airlines revolutioni*ed the airline industr# with what is %nown as the Southwest +ffect: low cost fares, oint-to- oint service, -10 minute turnaround. and an en/o#a$le friendl# atmos here) After the Airline 0ere!ulation Act of 19'8, Southwest ado ted a olit# that irre!ardless of the rofita$ilit# of e& ansion o ortunities, the com an# wanted to commit to a mana!ea$le annual !rowth rate of a$out 10-112) 3he followin! 4uestions and discussion will address the historical challen!es of Southwest airlines, the direction the com an# contem lated in 2002, and a $rief loo% at the challen!es of toda#) ; 2 "hat is the competitive business environment

3he airline industr# has alwa#s $een com etitive) 5n an anal#sis of the most rofita$l# investments as er our class discussion, sur risin!l#, airlines come in at the lowest return on each dollar invested at around 2)12) Southwest Airlines e& erienced 30 consecutive #ears of rofit a mere two #ears after it(s foundin! in 19'1) 6an# air orts $e!an re4uestin! Southwest service for their assen!ers, $ut throu!hout Southwest(s e& ansion, the com an# aimed to maintain a mana!ea$le !rowth rate and focus on their core com etencies of low rice fares that would com ete with the cost of drivin! to the destination) 5n the mid 1990(s, the ma/or carriers entered into rice wars to undercut com etition) Althou!h, these dealin!s did affect Southwest(s $ottom line, Southwest still mana!e to continue to turn a rofit and e& and due to their e& ansion into a reservation s#stem and their commitment to a culture and e& erience that assen!ers were drawn to) 8 2 "hat is the competitive advantage that the company obtained as discussed in the caseJ Southwest Airlines com etitive advanta!es are their oint-to- oint services which are !enerall# tar!etin! the fre4uent $usiness traveler) 7ith several re!ular fli!hts er da#, if a assen!er ha ens to miss their fli!ht, the# will $e automaticall# $oo%ed onto another fli!ht) Secondl#, Southwest strate!icall# secured routes throu!h secondar# air orts which !enerall# had lower fi&ed costs for the airlines and less con!estions for assen!ers ease) 8inall#, Southwest focused on 4uic%, relia$le turnaround time usin! onl# one version of aircraft, allowin! for familiarit# amon! staff and !reater efficienc# in turnaround) 9assen!ers were not assi!ned seats, sim l# $oardin! sections, which allowed for assen!er loadin! to $e conducted more efficientl#) 3he traditional airline model is the Hu$ and S o%e model, which in essence ta%es most assen!ers from the ori!ination, throu!h the hu$, and then transfers them to their destination) Southwest(s oint to oint s#stem was more relia$le $ecause it did not de end on the on time arrival of an earlier fli!ht for de arture) Southwest also im lemented the first and most sim listic fre4uent-flier ro!ram: urchase ei!ht fli!hts and !et one free) Southwest(s initiall# connected with four com uter reservation and tic%etin! s#stems and also the owerful SAB:+ s#stem) 3his allowed travel a!ents to view fli!ht information and even rint tic%ets) 5n 1994, Southwest was onl# connected throu!h the SAB:+ s#stems which ushed Southwest to develo the -tic%etless. travel ro!ram as well as Southwest)com) 9 2 "hat strategy andEor model was used or implemented in this caseJ

4argaining power o& buyers

9orter(s 1 =om etitive 8orces 6odel 'hrea ts Southwest vs2 All other Airlines

'hreat o& substitute

4argaining power o& suppliers

'hreat o& new entrants 4argaining )ower

Southwest airlines does stru!!le a!ainst the threat of su$stitutes much li%e an# other airline and in this case the threat of su$stitutes is the decision to use an alternate form of travel, such as drivin! or ta%in! a train) 3he airline industr# is sensitive to -tra!ed#. such as when there is a lane crash or an event li%e 9"11< consumers tend to switch to a su$stitute or chose not to travel in the first lace) Southwest(s $est defense is a stron! 9: cam ai!n, which we saw after 9"11 when the com an# launched ads sa#in! that when America is read# to fl# a!ain, Southwest will $e there)

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